MANAGING OPERATIONS

INTRODUCTION

The following assignment is based on operations managements followed in

IKEA. The purpose of this paper to analyse the operations management function in
the organisation by understanding strategic operations management, the operations
process and planning and control.

Operations management is an area of business that is concerned with the

production of goods and services, and involves the responsibility of ensuring that
business operations are efficient and effective. It is also the management of
resources, the distribution of goods and services to customers and the analysis of
queue systems.

About IKEA:

IKEA is a privately-owned company founded in Sweden by Ingvar Kamprad.

He first started to sell matchboxes, pens, wallets, picture frames, table runners,
jewellery and nylon stockings and decided to add furniture in 1947. IKEA has now
around 260 stores, much of which are located in Europe, the United States, Australia
and Asia. During the 1980s the company grew dramatically and has expanded its
operations to varied parts of the world. They have expanded into Japan, Russia and
diversified into catering for different target customers like children, etc.,

Between 1935 and 1946 furniture prices rose 41% faster than
household goods. Kamprad was intuitive enough to see this as a great business
opportunity. IKEA took a new approach to selling furniture in Sweden. Instead of an
expensive product that would take weeks for delivery, IKEA offered a product with a
good design and functionality at a price that almost everyone could afford. Kamprad
focused on selling furniture to young buyers who were often looking to furnish their
first apartment. Also instead of the stores being small and located in downtown,
Kamprad placed his stores on the outskirts of town but offered ample parking for his
customers. Most importantly, IKEA took use of selling through a catalog that helped
boost the business exponentially.

Nowadays IKEA is known for selling modern and utilitarian furniture at low
prices their vision is "To create a better everyday life for the many people". IKEA
motto is "Affordable Solutions for Better Living".

Their operations management are very strongly inclined and focused on

achieving this goal; they utilisation of resources is planned effectively to enable them
to gain advantage through deploying effective ways and measure for developing a
more economic way for the production of their wide range of service. This has
involved them in working closely with their suppliers in order to control aspects of
their business from the production line.
 Unlike most furniture stores, IKEA sells goods which need to be assembled by
the consumer at their homes instead of selling the products in pre-assembled
process. Which would consume a lot of space while in transit and while storing it in
their warehouses; this has enabled them to use space more efficiently in their
warehouse. The company has developed methods to satisfy customers with their
Unique Selling Point (show room, children’ area) and a wise use of technology (stock
control, internet).

IKEA’s operations include the way they manage the processes, this includes
the way they run their business-“culture”-, their norms and procedures- values-,
decision making and strategic planning, and the qualitative and quantitative control
of their resources- people, stock. To enable IKEA to maximise efficiency and
minimise costs they need to review or maintain the processes of their operations
which include the planning and control, their supply networking and the use of
technology.

IKEA has managed to develop effectiveness by understanding the needs of

their stakeholders and incorporate them into their agenda. However, from an
operations point of view the floor shop and location of key products becomes critical
and requires immaculate planning to enable the organisation to achieve the desired
results like display of finished products at one end to enable the customers to have a
feel and look of the end product. The display has to be planned and effected to
ensure that the customers have an more asynchronous view of the entire floor space
with different sections easily mapped out for the customer to move from one location
to another without any confusion. This whole process of laying the floor and floor
planning might look cumbersome and boring from the point of view of operations
managers however this is one of the critical aspects which would need to considered
before implementing any new additions to the store.

Problem Statement

This is the operations problem that would be addressed in this study and to
provide a structured process for undertaking the floor planning activities in the IKEA
floor. And provide insight into the ways and means through which customer
satisfaction can be attained through this innovative change strategy.

Relationship with the Problem

The problem is of prime importance to the organisation and this issue has a
direct relationship with the organisations process of handling customers and
providing un-paralleled customer service would be dependent on this criteria. Hence
a systematic and concise procedure in providing the service would enable the
organisation to achieve the desired results in increasing the revenue of the
organisation and ensure that the customer is satisfied with the overall service and
layout of the floor and easy to access from a customer point of view.
PROCESS FOR ADDRESSING THIS PROBLEM

The process for addressing this problem would need to assessed using a
process map. Let us understand why a process map is required?

- Incorporating changes to the existing systems without truly understanding

the need would be a costly mistake as the time and effort invested in the
effort would be wasted. There is also an outside chance of the process
becoming more complicated due to the incorporation of any unplanned
changes in the existing system or process which is already in place.
- If you cannot measure a process for its worth, the same cannot be
managed effectively. If the process cannot be managed effectively, there
is very little chance of improving the same.
- It is estimated that around 12 – 20% of human effort in an office
environment is lost towards re-doing things which went wrong in the first
place.
- Process maps enable us to plot a sequence of events on a diagram which
would provide us with a better understanding of the events involved in the
same. And helps us to identify bottlenecks, capacity issues, delays or
waste. Once this is achieved the same can be replicated for many other
processes within the organisation and improve the process further with
redoing the process map again and again.
- Process mapping enables an organisation to:
o Establish the current state of the process
o Measure the effectiveness of a project
o Capture information about the gaps in the process or slack that is
existing in the process.
o Plan for improvements with the existing information.

There are two basic types of process maps in existence and which are used in
general in most of the organisations. They are

Process Flowchart: These are very simple in nature and provide details about the
existing information flows and processes and provide a plan to create decision points
in the process. The plan can be revisited multiple times to increase the effectiveness
of the process improvement techniques on an incremental basis.

Deployment Flowchart: This is also at times referred to as ‘Swim lane chart’. Here
the segregation and segmentation of information is done on line with the people
carrying out the job or departments, etc.,

Let us have a look at the SIPOC model which has used in different situations the
SIPOC model is considered to encompass all the aspects of change or when a
process is being started in an organisation the model is considered for use this
follows a method of having a systematic change scenario and the flow chart is easy
to follow as the starting and end points are well defined and have a major impact on
the result which is desired from this change SIPOC stands for Suppliers – Inputs –
Process – Outputs – Customers. It provides a guideline which can be followed by the
end users to attain the desired results in a given scenario. This is considered as a
structured way of discussing the process and providing clear solutions in the
organisational context after which the process of drawing the process would follow.

The other concept which is of interest would be that of the business process re-
engineering, regulatory compliance, activity analysis, service level agreements, and
simulation which are done on a business level and would not be useful for the
current study being undertaken by us.

There are different types of symbols which are used in the development of
flowcharts. They are briefly described below:

The rectangle is a dialog box used to convey a task or an activity.

A diamond is used as a decision variable.

As per the above I will now describe a process map for IKEA for better utilisation
of the floor space and enable it to deliver the right products to the customers within
an amicable floor space.

Placement
As can be seen from the above which is a sample of the process map for planning
the display of items in the store can be discussed in this regard.

Let us now have a look at the operations management theories and the criticality
of the same in this regard.

Operations Management Theory & Practice

‘Strategic Management’ sits at the top of the table and is considered to be a

complex term and there have been different views on this by many researchers and
scholars on this topic. According to White (2004), “Strategic Management involves
both systematically developing an idea together with its implications and testing the
empirical validity & usefulness of that idea against the real world.” As per this
strategy can be argued as the study which is concerned with planning for the
unknown future over a long term and validating the plan against any historical or
empirical data and implementing the same to ensure the success and growth of the
organisation in future. Emergent strategies on other hand are realized by patterns
which are formed over a period of time, by iterative and selective process. (White,
2004; Mintzberg et al., 2005)

According to Johnson, Scholes and Whittington (2005),” Strategy is the

direction and scope of an organization over the long term which achieves advantage
for the organization through its configuration of resources within a changing
environment, to meet the needs of markets & fulfill stakeholder expectations.” Since
1960’s several notions of strategy led to formation of different strategy schools. Each
of these schools had different interpretations of a firm’s situation and different
assumptions of the strategy process that go with them. McKiernan (1996) and
Mintzberg et al. (1998) came up with ten different schools of strategic management.
From IKEA point of view it can be said that the process of differentiation was
adopted and the schools of strategic management which are relevant in this regard
are Design, Planning and Positional.

The Design school has been criticised by Ansoff (1991) where he states that
the schools does not stand up to the criteria set out by Mintzberg himself. And it has
failed to differentiate between prescriptive and descriptive statements.

The next strategy would be to assess the macro environment and this
undertaken by the study of different factors as elaborated by Francis J Aguilar who
coined the PESTEL analysis. From the point of IKEA this study has more relevance
as they have entered different markets and an analysis on Political, Economical,
Sociological, Technological, Environmental and, Legal aspects of the local
environment in which they are entering becomes vital for the organisation to sustain
in the markets they are operating.

Usunier & Lee (2009) have explained the concept of 4Ps model (McCarthy,
1964) state that the “4Ps of marketing mix (Product, Price, Place and Promotion) has
been extensively used; as a paradigm it continues to assist greatly in the design of
marketing strategies, serving to question their coherence and soundness.” Here it
needs to be understood how IKEA has effectively applied this strategy in their day to
day activities and offered a product which is convenient and attractive, priced at a
competitive rate, and the distribution channel is elaborately supported by their supply
chain management methods, being promoted in wide range of forums to meet the
needs of target customers in various geographies across the globe.
 Lowson, R.H (2002) states that there are different issues that need to be
addressed in an operational planning which comes under the tactical and strategic
planning activities undertaken by the organisation. This includes:

- What resources the company would need to acquire

- What work flows are necessary
- What processes and technologies are required
- The capacities needed and the levels of flexibility involved
- Human resource levels
- Quality levels
- What facilities are needed

As a summarisation it can be said that they can be classified as medium and

long term analysis, analysis at operations level, conceptualizing at operations level,
strategic thinking rather than tactical implementation. At the bottom of the pyramid
lies the operational teams which plan for a limited period of time and handle the day-
to-day activities of the organisation. The tactical teams which operate at the medium
level plan for the mid-term and follow the guidelines set by the strategic team which
operates at the conceptual stage at the top of the pyramid.

Finally the concept about Total Quality Management which was elaborately
explained by Kanji (1995) with the total quality pyramid which is replicated below
 The concepts which are of relevance in the Total Quality Management
methodology are

- Customer Satisfaction
- Internal Customers are real
- All work is a process
- Measurement
- Teamwork
- People make quality
- Continuous Improvement Cycle
- Prevention

These were further followed up with other activities like delighting the
customer, Management by fact, people based management. The real thrust towards
total quality management has been from the countries like Japan and USA.
However, globally the benefits of TQM were noticed by the corporate that were quick
to adopt these methods in their processes at varying degrees depending upon the
needs of the organisation. IKEA has also brought in these methods into the
organisation at various places starting with the floor space and extending the same
all the way back to its designer store where the initial developments of the products
are undertaken. This backward integration has enabled the organisation to derive the
advantages of Total Quality Management to the maximum extent possible.

There have been other related studies related to TQM like six sigma which
was concept Pande & Holpp (2002) have explained the concept where he states the
benefits organisations are drawing from the leaps in sigma’s. As per them six sigma
is an incremental improvement methodology which improves customer satisfaction,
reduces cycle time, and ultimately reduces defects in operations.

Strategy is a highly complex term which can be defined and interpreted in

many ways; there is no correct answer or a limited set of possible solutions. All
strategists are involved in creative thinking and creative action. A good strategy
creates space for this creativity. It is impossible to deal with formulation and
implementation of strategy as different and distinct stages in strategy making. There
is a massive overlap which should occur simultaneously. This overlap leads to
formation of emergent strategy as a result of implementing a formulated strategy.
Thus reformulation takes place with the help of emergent strategy. Structure is an
essential part of an organization and it is closely linked to strategy formation. In order
to make optimum use of resources, Organizational structure must be taken in to
consideration while formulating a strategy. Thus it is essential to have right match of
strategy with organizational culture. There are many ways in which strategy can be
implemented and balanced scorecard gives a good way of measuring organizational
performance.

All this methodologies and arguments are indicative of the fact that the
decisions and strategies adopted by the companies are both empirical and at times
based on the concepts practised by different companies in varied sectors. With the
onslaught of globalisation there has been wide distribution of knowledge among
various industries and the information flow has enabled IKEA along with different
organisations to draw the experience and expertise of employees from different
backgrounds and ethics to adopt the methods which would ensure the sustainability
of the organisation in a long term with focus being set at different levels for different
tasks like the segregation of the organisation into operational, tactical and strategic
levels have maintained the company in good stead focus the efforts on different
levels with different strategies.

Changes to Improve Quality Customer Focus

The changes that can be brought about in the organisation to improve quality
and at the same time the customer focus are more inclined towards the location
where the customer interacts with the organisation which is the shop floor. As there
is no interaction of the customer with the organisation other than this place, the feel
of the location needs to considered from all the possible ways to ensure that the
customer is satisfied by addressing the needs of the customer. This can be achieved
by collecting the preferences of the customer over a period of time and the same
assessed to ensure that the customer is able to receive information and new
products which are of his likely choices. At the other end of the spectrum the quality
aspects are of primal importance to the customer as well as the organisation. Since,
quality aspects are all encompassing they need to start the beginning in the factory
where the products are being developed and has to be carried on from there to the
floor where they are displayed this elongated approach would ensure that the
organisation’s quality standards remain same and standard across the breadth of the
organisation as this is what is required to ensure constancy in the operations and the
quality standards of the organisation.

Quality management would require the constitution of different audit checks

and quality audits at regular intervals to ensure that the organisation is able to
sustain in the regard without any aspects of delay or otherwise. This standardised
quality practices and audits would enable the company to avoid waste and loss in
transit or in the production floor which would have a direct impact on the bottom line
of the company.

From a change perspective IKEA is evolving with new and latest designs in all
seasons, the real focus should shift from what the company offers to understanding
the needs of the customer through feedback surveys and other modes of gathering
information which would enable the company to gain better insight into the demands
of the customers and be in a better position to provide ultimate service to its
customers.

Recommendations

The recommendations offered through the above research and theories are
as follows:

- The company has to adopt a systematic approach while planning the

display of items in the floor and the same needs to be considered from the
view point of the customer and a feeling of homeliness needs to be
created. As this would be the driver from that aspect, hence, IKEA would
be benefitted if they adopt the strategies concentrated around the shop
floor.
- The other recommendation is the segregation of the operations
management and alignment of the same with the strategic management
and creation of a flat structure of management as this would enable the
smooth flow of information and as the companies are moving towards
knowledge based corporate such a move would ensure that the
employees are more motivated and provide unparalleled service to the
company.

Conclusion
 Ingvar Kamprad's was instrumental to a point in the development of IKEA. He
instilled the major principles of cost-consciousness, simplicity, and common sense.
All of these enabled IKEA to offer such a quality product at an affordable price.
Anders Moberg also played a large role in development after he was appointed CEO
at 38. Moberg's plans gave way to some old ideals of IKEA and made way for new
ones. For example, sometimes the cheapest store location was overlooked for a
more quality area. These changes seemed to be well received but some believed
they were not coming fast enough. Kamprad was the driving force behind IKEA's
success, but he also had the insight to hire good people and encourage them think
and lead on their own. This insight is what allowed IKEA to expand and grow so
rapidly. The same holds true in operations management as at the end the
organisation and the operations all depend on the human factor and the same needs
to be considered before undertaking any changes the human resource factor needs
to be provided a relative importance.

The concepts and methods listed above have relevance to the subject of this
paper and have been the fundamentals on which the corporate were able to build
their successes.

The successful entry into different markets has enabled the company to grow
in various markets along with this the company was forced to adopt different
concepts to be able to sustain the global demand and supply needs.

Recommendations

The recommendations in this context would be that the company adopt a

singular concept of display of equipment as is followed by Container Store which has
an excellent method of displaying and selling equipments from its store. The same
methodology can be incorporated after suitable customisation to suit the needs of
the company and then the benefits can be derived.

The concept of having colour coded displays needs to be explored as it would

enable the customers to relate to their products in easy and friendly conditions and
would offer them the feel and comfort of the products that are being considered for
purchase by them.

The packaging and delivery is the strengths of this organisation the same
needs to be assessed for further improvements as the company would greatly
benefit if there is a value add in this regard.

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